VIENTIANE, July 16 (Xinhua) -- Laos may be gradually emerging as a key link in a regional value chain as more foreign firms consider the country for potential as a production base, local daily Vientiane Times on Monday quoted a report from the World Bank as saying.
The possibility of the landlocked country becoming a stronger link in the regional value chain was aired in the World Bank's mid-year report released recently.
This claim is based on the bank's analysis of Lao government data, which shows that the country's exports of semi-manufactured goods of electronics and telecommunications and electrical equipment have seen increases in recent years.
"Total value of manufacturing exports soared nearly three-fold in the last five years from about 270 million U.S. dollars in 2013 to 780 million U.S. dollars in 2017.
This is driven mainly by exports of electronics, telecommunication and electrical equipment from SEZs (Savanh-SENO and VITA Park) and food and beverages," the World Bank said in its report.
With this finding, the bank concluded that Laos, despite an inadequate business environment, can become a link in regional value chains, supplying more manufactured components and parts to factories for finishing abroad.
Observers said there were greater possibilities for Laos to take part in regional manufacturing chains due to the establishment of the ASEAN Economic Community.
Regional integration makes it easier for foreign firms to move raw materials and components more freely. It has also created conditions for companies to diversify their production bases.
In addition to this, foreign firms see that the expansion of their manufacturing bases into more countries will minimise investment risks as each production base in the region can support others to achieve the total production target especially in the case of unexpected disruption in one country.
Although regional integration can support Laos' ambition to take part in the regional production, there are a number of challenges for the country to address before it realises this aspiration, according to the report.
These constraints include a shortage of supply of skilled labor forces, as well as the need to develop infrastructure to extend electricity, water and logistics to more locations for the benefit of people and enterprises alike.
Cost of transportation to regional markets, lengthy process of business registration, corruption and private sector services are also named as challenges that the government needs to address, according to observers.
The Lao government is aware of the constraints and is extensively consulting and working with the concerned sectors to address the business and investment barriers, said the daily.
A Lao prime ministerial decree has been issued to relevant public sectors to improve their services to the private sector so that the country's ease of doing business ranking can be improved from the current 141st ranking to crack the top hundred within the coming two years.